Access to Earned Wages (EWA) has become a popular benefit for companies. According to our recent study of over 3,000 US workers, 10% of employers offer access to earned wages benefits, which allow employees to access already earned wages outside of pay cycles.
There are definitely benefits to providing employees with access to their earned wages. If a minor financial emergency arises and you don’t have enough money in your checking account, you can access the money you’ve technically already earned to pay for it.
EWA solutions are well suited to manage these small unforeseen expenses – $100-150 is the average amount – which often appears at the end of the month or shortly before payday. EWA is a valuable benefit that assists team members and helps them avoid incurring costly debt incurring expensive overdraft fees and depleting their savings. It can even out cash flow variability and provide peace of mind for today.
This is a very specific – and important – use case. But where it falls short is with greater spending. If the refrigerator breaks down, if a loved one needs help paying hospital bills, or if you need two months’ rent as security for a new apartment, accessing your paycheck won’t be enough. EWA does not help anyone in these situations.
For companies, the assumption can be that the EWA offer is a global solution to the complex problem of financial stress. But it also doesn’t help employees who are already saddled with costly debt that could actually prevent them from achieving short-term financial stability.
In a recent financial health network survey, 41% of respondents said they had cut back on spending on basic needs in the past 12 months because they couldn’t pay their current debts. Last year, half of americans delayed or completely skipped health care due to cost.
Solutions such as payroll-linked personal loans – which provide employees with affordable access to credit based on factors other than just credit score – are ideal when workers need larger sums of money or are stuck in a cycle of high-cost debt. They can serve as a smart addition to EWA, as they help workers pay off costly debt so they can build savings and improve their credit scores, which will allow them to have better access to credit in the workplace. ‘coming. This allows EWA to be used as intended, not abused, as is often the case today: nearly 60% of workers who have EWA use it as often as they can and spend the money on bills or regular payments.
The same Financial Health Network study found that more than 60% of workers would be more likely to stay in a job offering debt-related benefits – but only one in five workers have access to one of 13 debt-related benefits. debt that the organization questioned about. This shows that some employers are moving in the right direction, but not enough. Power has shifted from the employer to the employee, who can now demand more, whether it’s higher pay, more flexibility or better benefits. There was a softening of the tone before COVID – a move towards empathy – but since then the power dynamics have changed, with workers increasingly demanding changes to work environments and benefits.
The Great Resignation was the reward for this freedom and, for the first time in our lives, it led to a work environment dominated by workers. While EWA may be part of the answer, organizations owe it to their employees to find the right mix of benefits that lead to financial well-being.
Financial well-being is inextricably linked to job engagement and job satisfaction. It is the responsibility of employers to give employees the tools to be financially stable. This is what workers want. Although benefits focused on financial well-being are not yet ubiquitous, employees who have access to them rank them among the most important benefits. On average, more than 50% of employees with access to financial wellness benefits rank them as very important compared to 30-40% for other types of benefits.
More than 40% of employees are interested in low-cost salary-related employee loans and more than 60% are interested in emergency savings accounts. The interest in these solutions demonstrates that workers are interested in getting to work to get out of debt and save. They’re not just looking for well-marketed solutions that don’t end up easing the debt burden they’re suffering from. Some employers have figured this out, but for those who haven’t, judgment day is fast approaching.
Dan Maclin is CEO at Financing of salaries.